Private equity activity in the Nordic region – which traditionally is one of the strongest European regions for buyouts – fell to its lowest level for 12 years in the third quarter of 2012, when just $34m was spent on 17 sponsor-related M&A deals, according to data provider Dealogic. Transaction activity has not been that low since the third quarter of 2000, when $18m was spent on 12 deals.

The dismal third quarter followed a busy first half, with $2.4bn spent in the first three months of the year, accounting for one in five private equity dollars spent on European deals in that period.

The largest deal of the year was February’s acquisition by CVC Capital Partners of Nordic construction products distributor Ahlsell from Cinven and Goldman Sachs Capital Partners for €1.8bn, which significantly boosted the first-half numbers.

And deal volumes have been holding up even if values have been trending down, with 67 private equity buyouts closed in the first 11 months of 2012 as against 94 for the whole of 2011, 98 in 2010 and 70 in 2009.

Joakim Karlsson, co-managing partner of Nordic Capital, said: “Fund VII has closed six new transactions this year, all of them in the Nordic region, and we’ve never done so many deals in such a short period of time. The fund has had a good run, though the type of situation and opportunities have changed quite a bit from what we have typically seen over the last 15 to 20 years.”

In July, Nordic Capital acquired four companies that together comprise the leading providers of consumer financing and insurance to the retail sector in Sweden. The buyout firm is planning to combine them to form a new group with a turnover of about Skr2bn ($300m). The deal value was not disclosed.

Karlsson points in particular to a shortage of structured auction processes, and a trend instead toward proprietary situations, driven in part by a spate of failed auctions, and by macroeconomic reasons. He said: “People are reluctant, given the general uncertainty in the markets and around the world, to expose their company to the glare of the full-blown auction process. They are much happier to listen to a bilateral discussion with a potential suitor.”

Many of the larger deals in the region have taken place in the business services sector, with Bain Capital paying $900m for Sweden’s installation services provider Bravida in May, and EQT paying $430m for Anticimex, also of Sweden, which is Northern Europe’s leading provider of pest control, food safety and ancillary services.

Carl Harring, managing director at HIG Europe, oversees mid-cap Nordic investments. He said: “Sweden and Finland have fairly export-focused industries, so many mid-caps have a tough outlook right now. For example, the industrial sector in those countries is having some issues and looking to divest non-core assets, and there are a few of those on the block. Meanwhile, on the business services side, we are still seeing quite a lot of deals, and well-performing businesses.”

Many of the transactions taking place are secondary or tertiary buyouts. Bravida was sold by Triton, which bought it from Norway’s telecoms group Telenor in 2006, while Anticimex was sold by Ratos.
Ratos, a Swedish private equity firm, bought its 85% stake in the company from Nordic Capital in 2006, and said it would book a net exit gain on the transaction of about Skr940m. With the lack of organised auction processes, finding primary deals is tough.

In Norway, the oil and gas industry continues to dominate private equity activity, with deals including the June announcement that energy investor HitecVision was to put $232m into Spike Exploration, a start-up oil and gas company exploring opportunities in the North Sea.

In contrast to energy, the shipping sector has been struggling for some time, so distressed opportunities have presented themselves to buyout firms in the Nordic region. In March, the indebted Danish shipping firm Nordic Tankers split itself in two, selling its chemical tankers arm to private equity firm Triton for $30m. Triton will combine it with Herning Shipping, a Danish chemical and products shipping firm it already owns, under the Nordic Tankers brand.

Since February of last year, there have been four deals each worth more than $1.5bn in the Nordic region, and in the first three quarters of 2011 it accounted for nearly a fifth of European private equity deal value. The outlook for 2013 is incredibly difficult to call.